BUS 640 Week 4 Market Structures and Pricing Decisions Applied Problems (New)
$9.00

BUS 640 Week 4 Market Structures and Pricing Decisions Applied Problems (New)

This Tutorial was purchased 65 times & rated A by student like you.

 

This Tutorial contains following Attachments

  • BUS 640 new Week 4 Market Structures and Pricing Decisions Applied Problems.xlsx

Market Structures and Pricing Decisions Applied Problems.
Please complete the following two applied problems:


Problem 1:
Robert’s New Way Vacuum Cleaner Company is a newly started small business that
produces vacuum cleaners and belongs to a monopolistically competitive market. Its
demand curve for the product is expressed as Q = 5000 – 25P where Q is the number of
vacuum cleaners per year and P is in dollars. Cost estimation processes have determined
that the firm’s cost function is represented by TC = 1500 + 20Q + 0.02Q2.
Show all of your calculations and processes. Describe your answer for each question in
complete sentences, whenever it is necessary.
a. What are the profit-maximizing price and output levels? Explain them and calculate
algebraically for equilibrium P (price) and Q (output). Then, plot the MC (marginal
cost), D (demand), and MR (marginal revenue) curves graphically and illustrate the
equilibrium point.
b. How much economic profit do you expect that Robert’s company will make in the
first year?
c. Do you expect this economic profit level to continue in subsequent years? Why or
why not?

 


Problem 2:
Greener Grass Company (GGC) competes with its main rival, Better Lawns and Gardens
(BLG), in the supply and installation of in-ground lawn watering systems in the wealthy
western suburbs of a major east-coast city. Last year, GGC’s price for the typical lawn
system was $1,900 compared with BLG’s price of $2,100. GGC installed 9,960 systems, or
about 60% of total sales and BLG installed the rest. (No doubt many additional systems
were installed by do-it-yourself homeowners because the parts are readily available at
hardware stores.)
GGC has substantial excess capacity–it could easily install 25,000 systems annually, as it
has all the necessary equipment and can easily hire and train installers. Accordingly, GGC
is considering expansion into the eastern suburbs, where the homeowners are less wealthy.
In past years, both GGC and BLG have installed several hundred systems in the eastern
suburbs but generally their sales efforts are met with the response that the systems are too
expensive. GGC has hired you to recommend a pricing strategy for both the western and
eastern suburb markets for this coming season. You have estimated two distinct demand
functions, as follows:
Qw =2100 – 6.25Pgw + 3Pbw + 2100Ag - 1500Ab + 0.2Yw
for the western market and

Qe = 36620 - 25Pge + 7Pbe + 1180Ag - 950Ab + 0.085Ye
for the eastern market, where Q refers to the number of units sold; P refers to price level; A
refers to advertising budgets of the firms (in millions); Y refers to average disposable
income levels of the potential customers; the subscripts w and e refer to the western and
eastern markets, respectively; and the subscripts g and b refer to GGC and BLG,
respectively. GGC expects to spend $1.5 million (use Ag = 1.5) on advertising this coming
year and expects BLG to spend $1.2 million (use Ab = 1.2) on advertising. The average
household disposable income is $60,000 in the western suburbs and $30,000 in the eastern
suburbs. GGC does not expect BLG to change its price from last year because it has
already distributed its glossy brochures (with the $2,100 price stated) in both suburbs, and
its TV commercial has already been produced. GGC’s cost structure has been estimated as
TVC = 750Q + 0.005Q2, where Q represents single lawn watering systems.
Show all of your calculations and processes. Describe your answer for each item below in
complete sentences, whenever it is necessary.
a. Derive the demand curves for GGC’s product in each market.
b. Derive GGC’s marginal revenue (MR) and marginal cost (MC) curves in each
market. Show graphically GGC’s demand, MR, and MC curves for each market.
c. Derive algebraically the quantities that should be produced and sold, and the prices
that should be charged, in each market.
d. Calculate the price elasticities of demand in each market and discuss these in
relation to the prices to be charged in each market.
e. Add a short note to GGC management outlining any reservations and qualifications
you may have concerning your price recommendations.
Reference:

Write a review

Order Id


Order Id will be kept Confidential
Your Name:


Your Review:
Rating:   A   B   C   D   F  

Enter the code in the box below:



Related Tutorials
$12.00

This Tutorial was purchased 24 times & rated A+ by student like you.

We have another set of final paper based on walmart which could be found on this link   http://www.bus640homework.com/product-24-BUS-640-Week-6-Final-Paper-(Wal-mart)   Focus of the Final Paper  Research a specific company of your choice and identify some of the..
$3.00

This Tutorial was purchased 16 times & rated A by student like you.

Sustainable Competitive Advantage. Describe the circumstances under which a firm chooses a low-cost strategy to attain sustainable competitive advantage. What about the situations when a differentiation strategy is chosen? Provide specific real world examples.   ..
$3.00

This Tutorial was purchased 13 times & rated A by student like you.

New Product Introduction. Bayer Schering Pharma AG, Germany owns the Alka-Seltzer, which was launched in 1931 and was meant for relief of minor aches, pains, inflammation, fever, headache, heartburn, sour stomach, indigestion, and hangovers. The Alka-Seltzer Plus was a spin-off of the original me..
$3.00

This Tutorial was purchased 5 times & rated A by student like you.

Local Market Power. Bulls Eye department store specializes in the sales of discounted clothing, shoes, household items, etc. similar to the offerings at a regular Walmart or Target. Bulls Eye is the only department store in Show Low and the nearest other discount retailer is Target, located 49 mi..
$3.00

This Tutorial was purchased 7 times & rated A by student like you.

Strategic Behavior Oligopolies. An interesting example of strategic behavior comes from a 1997 article about Microsoft’s investment in Apple (New Straits Times, 1997). The article is included in the Required Readings list. Facing tough anti-trust scrutiny from government agencies, Microsoft provi..
$3.00

This Tutorial was purchased 7 times & rated A by student like you.

Contribution Analysis. Explain what is meant by “contribution analysis”. Carefully define the term and provide examples to illustrate it.   ..
$3.00

This Tutorial was purchased 5 times & rated A by student like you.

Relevant Costs. Two partners own together a small landscaping business in North Carolina, called Summer Lawn Care. They have been specializing in summer grass seeding, installation, and maintenance. Recently, the partners acquired special technology and know-how for winter grass installations and..
$3.00

This Tutorial was purchased 16 times & rated B+ by student like you.

Demand Elasticity. Please, read the article Hainer, R. (2010), provided in the required readings section for this week. The tobacco industry is a prime example to consider when talking about price elasticity of demand. While nicotine use can be addictive for many users, it is not addictive for th..
$3.00

This Tutorial was purchased 9 times & rated A by student like you.

Marginal Rate of Substitution. What is the marginal rate of substitution (MRS) and why does it diminish as the consumer substitutes one product for another? Use examples to illustrate   ..
$45.00

This Tutorial was purchased 21 times & rated A by student like you.

Week 1 Problem 1:  A generous university benefactor has agreed to donate a large amount of money for student scholarships. The money can be provided in one lump sum of $12 million in Year 0 (the current year), or in parts, in which $7 million can be provided at the end of Year 1, and a..